Posted by nithi.vivatrat on December 4, 2009
Economists and other talking heads were almost giddy today about November’s unexpected dip in the unemployment rate to 10%. It was not unusual to see quotes like these being tossed around:
- WSJ: “…a sign the labor market is finally healing as the economy recovers…”
- Chris Rupkey, chief financial economist at Bank of Tokyo/Mistubishi UFJ in New York, quoted by CNBC: “We’re almost back to normal… The economy is lifting at a much greater rate than expected.”
- Tom Sowanick, chief investment officer at the OmniVest Group in Princeton, New Jersey, also quoted by CNBC: “These numbers are almost too good to be true.”
I think it is. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on August 21, 2009
Bloomberg reported this morning that July sales of existing homes exceeded the forecast to reach the highest level it has been in almost two years.
The Bloomberg News survey of 64 economists had a July median forecast of a 5 million annual rate. The actual sales in July, according to the National Association of Realtors, exceeded this forecast with a 5.24 million annual rate.
Of course, the number of transactions tends to increase as prices fall: the median price of existing homes fell 15%, from $210,100 in July 2008 to $178,400 in July 2009. There is no new concrete evidence of price stabilization, as the supply of previously-owned unsold homes, measured in months, remained unchanged from June at 9.4 months. To this point, I wrote in previous posts about the possible existence of “shadow inventory,” homes whose owners are waiting for signs of economic improvement before putting on the market, which would continue to keep inventory high (and prices depressed).
Other factors to keep in mind: the elevated level of foreclosure activity will likely persist for some time, which will continue to depress prices. In addition, the $8000 first-time homebuyer federal tax credit will not be available for transactions occurring after December 1; first-time homebuyers accounted for 30% of July sales, so the end of the program could also have a negative impact on home sale activity.
Some good news today, but I’m taking it with a grain of salt, given these other long-term factors.
Posted by nithi.vivatrat on August 6, 2009
Amidst the signs being cited as proof of a recovering economy, other data still shows a rough road ahead. Yesterday, CalculatedRisk highlighted two such reports from Deutsche Bank (reported by Bloomberg) and the Wall Street Journal. The Bloomberg report indicates that:
The percentage of properties “underwater” is forecast to rise to 48 percent, or 25 million homes, as property prices drop through the first quarter of 2011, according to [Deutsche Bank] analysts Karen Weaver and Ying Shen.
According to Bloomberg, Deutsche Bank also believes that a large segment of the newly underwater homeowners will be prime borrowers (conforming and jumbo), not subprime or option ARM borrowers as has been the general case thus far.
WSJ reports an increase in the number of homeowners upside-down on their mortgages:
Some 24% of owner-occupied homes had mortgage debt that exceeded the values of those homes at the end of June, according to data from Equifax and Moody’s Economy.com. That number rises to 32% when looking at the share of homeowners with mortgages that don’t have equity left in their homes.
Overall, 16 million homeowners are “upside-down” on their mortgages, up from 10 million, or 15% of owner-occupied homes, one year ago.
Rough times ahead for a lot of homeowners, despite any improvement in the economy.
Posted by nithi.vivatrat on June 11, 2009
CalculatedRisk reports how an economic turnaround NEED NOT be immediately accompanied by increased hiring. This will continue to be a drag on housing prices and transaction velocity. When people don’t have jobs or are still afraid of losing them, they will be less likely to buy a home even when mortgage rates are low. Lenders will also be skittish in a poor job market. In addition, a lack of improvement in the job market will also cause foreclosures to persist as a problem. My opinion: wait for the hiring trend to improve before we see a sustained improvement in housing prices and transaction velocity.
Posted by nithi.vivatrat on March 2, 2009
Two key indicators were issued last week - the S&P/Case-Shiller national home price index and the Conference Board’s Consumer Confidence Index. Both appear grim. The S&P/Case-Shiller index set a new record for the largest one-year drop in its 21-year history, dipping 18.5% over the 12 months ending in December 2008. The Consumer Confidence Index fell to an all-time low to 25.0 (1985=100), plummeting from 37.4 in January. WAIT! There is more to read… read on »
Posted by nithi.vivatrat on February 24, 2009
Given my background in data warehousing and business intelligence, it would surprise none of you that I loved Kenneth Duberstein’s op-ed piece in today’s New York Times advocated a web-based reporting system of key performance indicators for the country. The closing paragraph:
Great steps forward in American history occur at moments when our deeply held values are reaffirmed in the face of changing realities. Such a moment is at hand. We need a shared frame of reference that will enable us to practice collective accountability. If Congress acts soon, by the time President Obama delivers his first formal State of the Union address next year, Americans will be able to continually assess the state of the Union for themselves.
As a nation, we face complex problems where people legitimately have differing views on the best solutions. But it would be nice if we could at least agree what the problem looked like and where we are now. Such a system would be an important first step.
Posted by nithi.vivatrat on February 18, 2009
In more economic news, the New York Times had this article a couple of days ago pointing to a handful of economic indicators showing that, while the economy was still worsening, there are signs that at least the rate of descent may be slowing:
“You go from a free fall to a steady decline,” said Michael T. Darda, chief economist at MKM Partners. “Is that good? No, it’s not good, but at least you’re kind of falling at a slower pace, and that’s the first step to some of these indicators starting to flatten out.”
Note this section towards the end:
The government reported that 598,000 jobs were lost in January, the most for that month in two decades, and economists expect the unemployment rate to rise to 9 or 10 percent from January’s 7.6 percent. Because employment numbers typically lag the broader economy, millions of Americans may still be losing their jobs even after the recession bottoms out. [emphasis added by me]
As I have mentioned in a previous post, housing prices will rise with consumer confidence. If many Americans are losing jobs “even after the recession bottoms out,” I believe that an improvement in consumer confidence will lag behind other economic indicators in an upswing, and any increase in housing prices will lag even further behind that.
